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BEIJING (MNI) - The coronavirus outbreak may shave China's Q1 growth by as
much as a full percentage point from last quarter to 5% as knock-on effects in
the crucial services industry are amplified, clouding the outlook for full-year
2020, according to advisors close to the government interviewed by MNI.
"Growth could register 5.6% to 5.7% (this year) if the situation is
contained this month and contingency policies are enforced effectively and in a
timely fashion. If not, GDP could drop below 5.5%," said Zhang Ming, a senior
fellow at the Institute of World Economic and Politics under the Chinese Academy
of Social Sciences.
While services, accounting for about 60% of growth last year, have so far
received the biggest impact, disruptions to supplies and transport are also
beginning to curtail manufacturing production, which normally would have resumed
following the Chinese New Year holiday, other advisors said.
Services were hit hard before the extended holiday ended on Feb. 2 as
authorities nationwide ordered non-essential businesses to shutter and told
residents to stay at home. In the first seven days of the holiday alone, the
three biggest consumer sectors, movies, catering and tourism, lost over CNY1
trillion in revenue, according to Evergrande Research Institute.
"The authorities should now prepare for the worst case that 6% growth may
not be reached given that the duration of the virus outbreak remains uncertain,"
added Yu Yongding, a former member of the PBOC monetary policy committee. Yu had
previously urged the government to keep a 6% target for GDP growth this year.
The authorities should take all measures necessary to ensure supplies for
industry, Yu stressed.
Most factories will not resume production before Feb. 10, following the
extension of the holiday in different provinces.
Small and medium-sized companies may struggle to pay salaries and meet debt
repayments, or even to survive, said Xu Hongcai, deputy director of the Economic
Policy Commission of the China Association of Policy Science.
--DEMAND MAY RECOVER
But demand for houses, cars and durable goods should recover once the
outbreak retreats, said Zhang Bin, head of global macroeconomic research at the
Institute of World Economics and Politics at the Chinese Academy of Social
Sciences. Consumption and economic activities could return to normal by March if
the outbreak comes under control in February, he said.
Other advisors also expressed optimism on long-term growth. Growth numbers
should not be overemphasised so long as employment is ensured, said Zhu
Baoliang, chief economist at China's State Information Center.
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